The
Chief Accountant explained that the meeting had had to be
rescheduled to take place on the 26 September due to this being the first audit undertaken by the new
external auditors and a couple of technical notional
adjustments being made to the
accounts.. The Committee were thanked for moving the
meeting whilst the adjustments were
finalised and it was noted that the meeting was still being held
within the deadline of the 30 September.

The
Chairman suggested that the September meeting in 2017 should take
place towards the end of September to ensure that paperwork would
be available beforehand.

There
was a discussion in respect of ongoing concerns about the value for
money that the council receives from external
contracts/partnerships. Whilst there
are a number of ways that this assurance is obtained the members
asked that concerns in respect of Infrastructure + be followed up
with the appropriate scrutiny chairman.

Resolved:That
the

·minutes of the meeting held on the 27 June 2016 be
confirmed and signed by the Chairman.

·Committee Chairman write to the Chairman of the
Prosperous Staffordshire Select Committee seeking reassurances
regarding the scrutiny of the contract with Amey and Infrastructure Plus.

The
Chief Internal Auditor discussed the Annual Governance Statement
prepared in line with guidance issued by the Chartered Institute of
Public Finance and Accountancy (CIPFA) and the Society of Local
Authority Chief Executives and Senior Managers (SOLACE) which
detailed what the Committee was responsible for, the aim of the
governance framework, the governance framework itself, the review
of how effective the governance framework was and to highlight any
significant governance issues. The document was required on an
annual basis.

Section
three of the report detailed the systems, policies, procedures and
operations in place to ensure an effective governance framework.
The report detailed the review undertaken to ensure that effective
governance was operational. Actions
contained within the 2014/15 Statement were outlined within the
report and the annex to the report contains there actions taken. An
unqualified annual audit letter for 2014/15 had been received and
the outturn report from internal audit had been received which gave
an adequate opinion. Other reasons to have confidence that there
was effective governance in place included; no issues having been
reported through to the Monitoring Officer or the Chief Financial
Officer under their official powers, effective scrutiny in place
through the Select Committees, appropriate action plans implemented
to strengthen controls, the risk register continued to be revised
as the operating model continued to develop and a low number of
complaints. Significant governance issues highlighted for 2015/16
would be taken forward by the officer Corporate Governance Working
Group included seven key pieces of work as detailed within the
report. These significant issues would be monitored by the Group
and where appropriate included in the Strategic Risk
Register.

Whilst
the work in respect of governance arrangements was praised there
remained a concern that there are risks in the number of decisions
that are taken by individual Cabinet members as opposed to all the
information being made available to and the decision being made by
the full Cabinet. This was a
concern raised previously by Corporate Review but remained a
concern to date.

The Director of Finance and Resources explained that
the rational behind

Delegated decisions was about being more effective
and efficient in decision

making. In addition to matters that are delegated to
each Cabinet member

there are occasions when a collective decision of
the whole Cabinet was

required in respect of overarching direction and
intent but for reasons of

effective and efficient decision making the
detail in respect of that decision
is

considered and the decision made by the appropriate Cabinet Member. This

was in accordance with the County Council’s
arrangements which were

consistent with good practice guidance.

Whilst
there are, in addition, informal ways that decisions are discussed
by all Cabinet members the concerns for individual Cabinet members
remained using the issues around the Better Care Fund (BCF) as an
example.

Concerns were also raised in respect of the quantity and
complexity of the issues that the County Council needed to respond
to within limited resources, particularly time.

The
report was introduced and the slides circulated to the Committee
prior to the meeting explained the format, content and the rules
that existed for the Statement of Accounts and highlighted some of
the key points in relation to the 2015/16 accounts.

The
County Council had £1.2 billion yearly gross expenditure. To
comply with the rules of local government accounting the accounts
have to apply with international standards and a range of notional
transactions had had to be included to demonstrate compliance with
international standards. These notional transactions are then
reversed out, complicating the accounts.

In
response to a question, the Chief Accountant clarified that there
were two schools funded through PFI mechanisms in the 2015/16 year
of account, neither of which had transferred to academy status.
Looking to the future, one school was likely to move to an academy
and the implications of this were being considered. The arrangements would be dependent on who would
continue to receive the funding for the borrowing. If this went to
the academy the liability under the contract would also move to the
academy. It was uncertain if this would be the case however as two
schools were let as one contract and this contract would therefore
need to be separated. The funding for borrowing would follow where
the liability fell so there would be no impact on the Council
however there would be notional adjustments to be made which would
then need to be reversed out.

In
response to a question, the Director of Finances and Resources
explained that although it was too early to say what the impact of
Brexit would be, the Pension Fund since
Brexit had increased in its value because of increased stock market
valuations. There was uncertainty about the impact in the medium
term but in the short term the biggest impact of Brexit had been on
exchange rates rather than the value of assets. Most commentators
anticipated that there would be a negative impact in medium term
growth but the long term impact would depend on the alternative
arrangements secured with the markets in Europe post
Brexit.

In
response to a further question in respect of PFI, the Chief
Accountant reassured the Committee that the previous accounting
treatment which was based on a set of assumptions and judgements on
the contract was correct. The accounting was not wrong but the
interpretation of the clauses in the PFI contract had changed as
the external auditors had had a slightly different view of the
assumption around the operator’s income from third parties.
Any waste to resource plant would generate electricity and the
income from this had to be treated as either due from the County
Council or from users. The
interpretation of what was a user had been questioned. The external
auditor’s interpretation of a user of the plant meant that
the notional liability needed to be split. The PFI asset was shown
notionally in the County Council’s assets and this had to be
balanced against a finance ...
view the full minutes text for item 36.

Steve
Clark, Ernst and Young LLP, explained that the document presented
concluded the first year of Ernst and Young’s appointment as
auditors to the County Council and Pension Fund. Thanks were
expressed to the County Council’s team in supporting the
process. Overall the audit had gone well. He highlighted in terms
of the opinions, an unqualified audit opinion was being issued in
both financial statements in accounts terms and the value for money
statement. This did not happen everywhere. Once the Committee had
approved the accounts and the letters of representation the
accounts could be signed. The auditors had not received any
objections from members of the public and there were no unadjusted
audit differences. There had been a number of audit adjustments,
the major one relating to the PFI scheme which had been explained
in detail earlier in the meeting by the Chief Accountant. In terms
of materiality, the level to which the audit work was focussed had
been discussed with the Committee previously and was referred to in
the report under the scope and materiality section and there was no
change to this. The external auditors had initially identified two
significant risks, the risk of management override and the risk of
revenue and expenditure recognition. These were standard
significant risks identified in any audit of any organisation. As a
result of going through the detail of the PFI, the PFI had also
been classed as a significant risk because of the level of focus on
this. This matter had been dealt with however and it was not
anticipated this would be an issue in the future. The other area of
significant work undertaken was in relation to value for money. A
number of procedures had been undertaken to understand the
arrangements that the County Council had in place to secure value
for money. The external auditors had examined a number of things
specifically related to the BCF up until the 31 March 2016 and the
auditors had concluded that they were satisfied with the
arrangements that the County Council had in place.

Mark
Surridge, Ernst and Young LLP,
explained that the audit had commenced with two significant risks
over the financial statement. The extent of the work that the
external auditors planned to perform in relation to the significant
risks was set out in the report, and the Committee could take
assurances from work that the external auditors had undertaken.
Assurance was given that there was no issues to report in relation
to the significant risk that management may override controls and
manipulate the financial statement in a way that they should not.
Secondly, regarding the significant
risk around expenditure recognition which was essentially the
undercounting of expenditure to manage the financial position
incorrectly, a variety of procedures
had been undertaken to give the Committee assurance that the
expenditure in the financial statement was not materially
misstated. The PFI work was very technical and took time to
conclude due to the nature of interpretation and judgement
required. ...
view the full minutes text for item 37.

Joint Report of the Director of Strategy,
Governance and Change and Director of Finance and Resources.

Minutes:

The
Head of Democracy acknowledged the work undertaken on the item by
the Chief Internal Auditor. Previously it had been brought to the
Committee’s attention that there had been changes to the
guidance around corporate governance and the County Council was
looking to introduce these changes. The assessment of the old
principles compared to the new principles was included in the
report. A new single page diagram of the key methods by which the
Council assures itself that all was working properly was also
included. There was more work to do to assure that the evidence was
available to show how well the arrangements were embedded, where
there were issues that needed to be reflected on and the
development of a new action plan to address any such issues. .
Members were asked to note that there was more work to do and that
there would be further report to the Committee on
progress.

Resolved:That the
Committee

·Note the updated Code of Corporate Governance and
the revised Single Sheet Local Framework.

The Chief Internal Auditor referred to reports
previously shared with the Committee following the decision to
close the Audit Commission and to end its role in appointing the
external auditor. Original transitional arrangements for the
appointment of all external auditors within the public sector and
for the setting up of audit fees were
extended, for one more year – 2017/18. , The Council had
received confirmation that Ernst and Young LLP would continue as
the external auditor for that period. When the transitional
arrangements end on the 31 March 2018 each Council has the ability to move to local appointment of the
external auditor. The County Council and Pension Fund should
appoint an external auditor for the 2018/19 financial year by
December 2017. There were three broad options available, firstly to
make a stand alone appointment via an auditor panel, secondly to
set up a joint auditor panel or undertake joint procurement
arrangements with other public sector bodies within the particular
area or thirdly to opt into a sector led body
arrangement. The Local Government
Association had lobbied for a sector led body to be established to
potentially procure future audit contracts. This body would have
the ability to negotiate contracts nationally, potentially
maximising opportunities to procure sustainable external audit
arrangements on behalf of the whole sector. In July 2016 it was
announced by the Department for Communities and Local Government
that Public Sector Audit Appointments Limited had been named as the
sector led body and that the first appointments made by this body
would be for 2018/19. The advantages and disadvantages of each
option were outlined in the Committee paper, including a detailed
question and answer paper published by Public Sector Audit
Appointments Limited. CIPFA had produced guidance on setting up an
auditor panel which organisations would need to adhere to when
making their own appointments and also if a joint auditor panel was
set up. A sector led body could provide the opportunity to
potentially obtain greater scales of economy. The County Council
had until 2017/18 to make an appointment but in practical terms
this meant that one of the options had to be deemed as the
favourable route by December 2016. Public Sector Audit Appointments
Limited would be looking to issue the invitation to join the sector
led body by December 2016 which would give organisations eight
weeks to decide whether to go down this route. Contract
negotiations would then commence in Spring 2017. Over two hundred
and seventy public sector bodies had said that they would prefer
the Public Sector Audit Appointments route to do the procurement on
their behalf when consulted. The Council is required to take action
to appoint the external auditor from April 2018. The appropriate
route for the organisation would need to be approved by Full
Council following a decision by the Audit and Standards Committee.
The recommendation to the Committee was for the Council to opt for
the forthcoming cycle of appointments to be undertaken by the
Public Sector Audit Appointments ...
view the full minutes text for item 39.

A
Member asked if the Committee could consider if the Council should
have an appeals process for decisions made by Officers in the field
of licensing or contracts. It was suggested that there should be
some further right of appeal as people currently could only make a
complaint to the Council and then take the matter to the Local
Government Ombudsman or to Judicial Review. It was requested that
the possibility of setting up an appeals panel could be
explored.

The
Committee Chairman clarified that for the normal taxi driver
function, taxi drivers had a right of appeal to the Magistrates
Court. The regulated work referred to scenarios when drivers were
carrying vulnerable people. He understood that in this scenario
there was an appeals panel of two people who played no part in the
decision making process, however this panel did not include Members
of the Council. He undertook to discuss this matter with
Officers.

A
Member referred to a letter from the Committee to the Leader of the
Council asking him to consider setting up a position of a Cabinet
Member without a portfolio to focus on the financial position of
the Council and Entrust. It was queried if a response had been
received.

The
Chairman confirmed that a reply had been received and it had been
considered that there were enough checks and balances in place,
including the Overview and Scrutiny Committees, and the Council
therefore did not require a Cabinet Member without a
portfolio.

There
was a discussion in respect of the optimum time for training
members in respect of changes to local government
funding. It was agreed that this
training was best arranged for after the elections and when there
was sufficient detail available as to what was to change, how these
changes affected the County Council and when the changes would be
coming into force.

Resolved:

That
the Committee Chairman discuss the process for appeals in relation
to regulated work with Officers and report back to the Committee on
this matter.

41.

Exclusion of the Public

The Chairman to move:-

“That the public be
excluded from the meeting for the following items of business which
involve the likely disclosure of exempt information as defined in
the paragraphs of Part 1 of Schedule 12A (as amended) of the Local
Government Act 1972 as indicated below”.